- by New Deal democrat
While much of the official government data is still delayed, months after the end of the shutdown, privately sourced data remains fully up to date.
And March data started out with the ISM manufacturing index, which was our second piece of (mainly) good news of the morning.
The headline ISM number (blue in the graph below) rose 0.3 to 52.7 (recall that any number above 50.0 indicates expansion). The more leading new orders subindex (gray) did decline 2.3 from 55.8 to 53.5, but obviously that is also still positive. The three month averages, which smooth out a little volatility, improved to 52.6 and 55.5:
One of the surprises since last autumn has been the rebound in manufacturing despite the tariff situation, even though much of it is likely due to AI data center construction.
Goods production is only about 25% of the US economy, so normally I weight it against the comparable services numbers, but this month there is really no need, since services have been above 50, indicating expansion, consistently since late last summer.
The bottom line is, this number suggests continuing expansion in the next few months - although I feel compelled to add that I doubt much of the impact of higher fuel costs and associated interruptions from the Iran war debacle has made it through into the index numbers yet.
Several other components of the index are worth noting this month as well.
First, the “less bad” trend in employment continued in March, as it declined very slightly, -0.1, to 48.8. But all three months so far this year have been significantly better than the dismal readings that began last February:
There was one important negative in the report, however - prices paid. These shot up to 78.3, the highest number since June of 2022:
This continues the sharp inflationary pulse that started in February.
So, while the ISM manufacturing index indicates expansion, it is an inflationary expansion, which is going to put continued upward pressure on interest rates, and tend to keep the Fed on the sidelines in terms of any hope of further rate cuts in the immediate future.
